With VAT due to go to 20% in a few weeks time and offshore retail about to benefit at further expense to UK mainland retail, Adrian Sanders the Liberal Democrat MP for Torbay asked David Gauke the Exchequer Secretary the obvious question on the 13th of December
(1) what estimate he has made of the number of UK businesses based on the UK mainland that ship goods to UK mainland customers via the Channel Islands
(2) if he will make an estimate of the likely effect of the rise in the rate of value added tax in January 2011 on the number of UK-based mail order businesses transferring operations to the Channel Islands.
The answer he got from Mr Gauke was pathetic :
“No such estimates have been made”
Since Mr Gauke appears unable to answer the question we will do so for him :
1) We know that 96% of UK internet Music Retail is to be found on Jersey and Guernsey and that virtually all of that also has a UK mainland presence. Most major UK mainland high street retailers are also on the Islands selling VAT free.
2) Since The Channel Islands are not financially transparent jurisdictions we cannot know for sure what the figures are for UK companies moving offshore but we know from speaking to consultants and trust companies that many UK companies are looking to transfer to the Islands if at all possible. The reality s that if a company faces offshore competition then they have a simple choice
a) stay on the mainland and go out of business as a result of the competitions 20% advantage or
b) move offshore and compete on a level VAT free playing field.
UK companies really have no choice but to move offshore if the UK Authorities continue to allow LVCR to be abused.